How to Finance a Car with Bad Credit and No Cosigner

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - February 27, 2020

Getting approved for a car loan with bad credit and no cosigner may seem impossible. It’s not – if you know where to go. There are options for those needing an auto loan with less than perfect credit, even when you have to go it alone.

What Is a Cosigner and How Does it Work?

A cosigner may help you get approved for a car loan, because they lend their good credit score to you, the primary borrower. The cosigner also agrees to make the loan payments if you can’t. Think of a cosigner as a backup plan on your auto loan, and keep in mind that if you miss a payment, or pay late, it also negatively affects your cosigner’s credit.

When you’re looking to get financed for a car loan with poor credit, some lenders require you to have a cosigner in order to qualify.

Most borrowers choose a cosigner that's either a family member or a friend, but the main requirement is the cosigner must have a good credit score. With a cosigner, you could have a lower monthly payment, a lower interest rate, and you increase your chances of an auto loan approval.

Options When You Don’t Have a Cosigner

If you can’t get approved for a vehicle without a cosigner, there are still a number of options at your disposal. One option is to consider looking at used cars. A used vehicle may not be what you dreamed of, but it can be a good choice if you’re in a pinch and need a car right away. Getting a used vehicle could improve your chances of auto loan approval to help you build your credit score.

Another option is a buy here pay here (BHPH) dealership. Most times, these dealers don’t check your credit score – they care about your income and whether or not you can make the monthly payment. You may be paying more in interest, however, which means a higher cost in the long run.

While BHPH dealerships don’t usually check your credit score, they may not report your on-time payments either, which means your credit score won’t improve from this type of car loan. On the flip side, BHPH report missed payments, defaults, and repossessions, so be careful if you decide to go this route.

Dealers with Special Financing

Some special finance dealers work with subprime lenders, or bad credit lenders. A subprime auto loan is for people with a credit score usually below 660, and they can be gotten with no cosigner. If you want to improve your credit score for future purchases, you should consider dealerships with special financing options.

A subprime lender typically looks at three main aspects before approving a borrower for a car loan: ability, stability, and willingness to pay. These areas include monthly income, residence and work stability, a down payment, and a few other factors.

Preparing a Down Payment for Bad Credit Car Loans

A bad credit borrower is going to need a down payment for a bad credit auto loan, for a subprime dealer or a BHPH dealer. This requirement can be difficult to meet, but it really is in a borrower’s best interest to save as much as possible for a down payment.

As a bad credit borrower, you generally need a down payment of at least 10% of the vehicle’s selling price, or $1,000, whichever is less. However, when a lender is on the fence about considering you for a car loan without a cosigner, a larger down payment could help tip the scales in your favor.

It’s a good idea to have a down payment, because it can lower your monthly loan payment, decrease the amount you’re paying in interest charges, and reduce the total amount of your loan. While another option, a longer loan term, may seem like an easy way to lower your monthly payment, you end up paying more in interest charges over the loan term.

Improve Your Credit with a Car Loan

If you have poor credit and don’t have a cosigner, you’re not out of options and may need a subprime auto loan. While your credit may be less than perfect right now, a car loan can improve your credit score for future purchases.

Ready to look for a lender that can work with your unique credit situation? At CarsDirect, we work with dealerships that have special financing departments that specialize in bad credit auto loans. After you complete our free car loan request form, we look for a dealer in your area that may be able to help.


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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